Acquisitions vs corporate-startupcollaboration: corporations quest to bemore innovative : A case study on the advantages and disadvantages of startupacquisitions and startup collaboration

Abstract: In recent years, startups have become frontrunners of innovation. Large corporations today are trying to keep up with startups but are falling behind due to long bureaucratic processes. In order to keep up with the startups, corporations collaborate with startups through accelerator programs and acquisitions. The purpose of this study is to understand the decision making process corporations go through when they decide to interact with startups to reach their innovation goals. The study has used a qualitative research approach in the form of a multiple case study to look into the decision making process of larger corporations. Three corporations of various sizes have been interviewed with a total of 5 respondents. The gathered empirical data was analyzed through inter organizational relationships, open innovation and a conceptual framework.  The empirical data in this research displayed that companies use a mixture of strategies, including internal R&D, acquiring startups and corporate-startup collaborations, to reach their innovation goals. These alternatives are evaluated based on factors such as financial gain, feasibility within the organization, and input from different stakeholders, including experts within the relevant fields. Companies are aware of the risks involved, but are willing to take in order to remain competitive, avoid losses and stay innovative. They furthermore tend to choose multiple alternatives to spread their chances for gaining innovative ideas, in order to avert loss and diminish sensitivity. Ultimately, the companies use startup collaborations to minimize losses when acquiring startups, to stay ahead of their competitors, and to help them remain innovative as they grow.